Building a strong vision for Irish dairy exports

The chance of the necessary changes to governance structures being identified and implemented at Ornua have been greatly enhanced by Aaron Forde stepping down as chair. In stepping aside he has put the organisation first.

Over the last few years, a number of the larger milk processing businesses and even some of the smaller ones have developed their own routes to market for various products. This challenges the model of having one voice (Kerrygold) for Irish product on the international market.

The Kerrygold brand was devised to give one voice for marketing Irish produce internationally. New Zealand, the Netherlands and the UK had the same concept back then but all have since moved away from collective marketing.

There have been cracks over the years with many Irish processors taking up customer-facing positions at trade shows around the world. We see it again this week with a number of milk processors sending representatives on the trade mission to Japan.

Tipperary Co-op (page 19) is investing in new facilities for higher spec products and it wants to develop business-to-business relationships with new customers. It is in Japan to research the market and make new contacts.

The same can be said for Glanbia, Carbery, Dairygold and Kerry, who all sent teams to Japan. All trade with Ornua (excluding Kerry) but all also trade independently. An Ornua representative is also in Japan this week.

Remember, Kerry stepped back from Ornua (the Irish Dairy Board and formerly Bord Bainne) as it wanted to plough its own furrow. The irony of the issue is many farmers and consumers think the brand Kerrygold belongs to Kerry, when in fact it is the one processor that doesn’t have an ownership stake in the Ornua brand or business.

Products derived from milk from the same fields that are undercutting each other internationally is not the way forward

The Ornua governance model is fundamentally flawed. It is very difficult for a chief executive to run a dairy business and develop a sales team searching for new markets with it, while at the same time have full visibility and market information from sitting around the Ornua board table.

Over the last seven years, there has been a process whereby the Ornua chief executive has tried to establish a commitment from the individual chief executives for a volume and quality of product on an annual basis. This gives Ornua some level of comfort in terms of selling the product and making deals for large volumes as Ornua does not directly control any processing, except for the new butter plant in Michelstown.

The development of the new plant was a new departure for Ornua in Ireland after a long period where management said it would not get involved in primary processing. However, given the demands for standardised quality, improved packaging and the ability to make quick changes for specific customer requirements, Ornua invested in a state-of-the-art site in Michelstown. A strong relationship was hammered out with Dairygold for raw ingredients and the plant got up and going.

The challenge for Ornua and management of Ornua is that farmer investment and 60 years of success at marketing has developed a well-recognised and extremely successful brand in Kerrygold.

However, the establishment of other brands of powder, cheese and butter in this space – competing directly with the Kerrygold brand – effectively undermines the premium Kerrygold can get from the market.

Milk suppliers lose out as the same value will not be returned by competing brands. Products derived from milk produced from the same fields in Ireland that are undercutting each other on price internationally is not the way forward.

To build a vision and ambition around a business requires clear thinking, a united board of directors, a commitment for the future and good management to make it all happen. If one of these ingredients is missing, it makes the process much more difficult and the ability to succeed less likely.

The changing of the guard is the first step in building a new future. There are likely to be more far-reaching moves and decisions to come.

In follow-up to our article last week, it is clear there are divergent views on what is happening in terms of recalibrating, improving or tightening up on grading at beef factories. If there are changes coming, the Department needs to release any trial results to stakeholders. On the €100m Brexit fund, we have suggested that some form of restructuring that will benefit the sector should at the very least be discussed. The suckler sector requires a structured support mechanism – not an ad hoc payment.

For the European Commission to strike a Mercosur deal offering a beef quota to South America as the EU and Irish beef sectors struggle would be indefensible. Trade is essential but must be conducted in a manner that is sustainable economically for EU producers and environmentally for the rest of the world.

If a no-deal Brexit occurs, the UK has indicated a willingness to create a 230,000t quota to import beef with zero tariffs. This would devastate Irish and EU beef producers.

Then there is the EU’s commitment to the environment. We repeatedly hear how the environmental element of the next CAP will increase from its already high level. Part of this is persuasion of landowners to plant more trees, and there is a feeling among farmers that there is a desire to convert many counties to forestry. Leitrim is often referred to as an example and yet in May alone an area of rainforest and Savana the size of Leitrim was cleared for agricultural production in Brazil.

The Bord Bia and ministerial objective on the trade mission to Japan this week was to showcase Ireland to 126m increasingly affluent consumers and diversify markets.

It’s a long game and – as Adam Woods reports – the Japanese have a slower way of doing business. The presence of African swine fever in China could speed things up. Our strict animal health controls and EID in sheep have no doubt played an important role. The question that remains is whether it delivers for Irish farmers.

Spreading risk and reducing our dependence on the UK for beef exports makes sense but we have to be clear that it is the work being carried out by Irish farmers that is allowing us to win these deals and they need to be rewarded. The opening of the Bord Bia Toyko office is a big statement of our intentions to become serious players in the Asian market.

Interestingly, the ambassador’s comments around de-risking markets post-Brexit are important in the context of valuing our participation in the EU. I believe a number of this week’s activities were co-financed by the EU under the “Enjoy, it’s from Europe” campaign, which has a total budget spend of €5.7m over three years.

Bord Bia’s Declan Fennell is right when he said sheep market access in Japan is another endorsement of Irish production standards and recognition of the high regard in which Ireland is held on the international stage.

Men are traditionally poor at talking about their feelings but during Men’s Health Week – which is running until Father’s Day on Sunday – farmers should make an effort to take time to talk to friends, family or professionals if they’re experiencing any issues.

We have to remember as well that many farmers are still living with the legacy of a tough 2018, and a Teagasc survey flags that almost two-thirds of farmers said they were stressed.

Friends and family are often cautious about broaching the issue but take the opportunity this week if you have concerns for someone.

Any questions about traceability in the Irish food chain potentially pose a serious threat to our reputation as an exporter of top-class produce.

Recent food safety alerts relating to Irish horsemeat, as reported by Caitríona Morrissey, are worrying and could cause reputational damage.